Corporate Japan opening venture capital wallet wider
Investment skyrockets by a factor of 27 in five years
TOKYO -- In a trend that may help give birth to more innovative young enterprises, such Japanese blue chips as Toyota Motor and Panasonic are increasing investment in startups, pouring 27 times as much money in 2017 as five years before.
Venture capital investments by major Japanese corporations through in-house funds and other channels totaled 172 last year, 19% more cases than the year before and marking their highest level ever, according to mergers and acquisitions consultancy Recof. Such investments began to rise sharply in number in 2011 and amounted to 68.1 billion yen ($611 million) in 2017, also a record.
Securing funding in early stages until research and development get off the ground and products are made has been a challenge for startups, which often rely on initial public offerings to raise funds.
Of the big companies' venture capital investment last year, 35.3 billion yen went to enterprises in Japan. While this may pale beside the 155 billion yen raised by startups that year through IPOs on Japanese markets for emerging companies, it also indicates an environment where startups have easier access to funds and have a greater chance of surviving and developing new technologies.
In the U.S., around 90% of such ventures choose to procure funds by selling out to larger concerns. The use of corporate funding to spur innovation helps to keep new companies coming actively, refreshing the industry.
Swath of funds
In Japan, internet and communications companies have been notable leaders in setting up corporate venture capital funds. But the scope has broadened of late to include automakers and other enterprises in such sectors as real estate and finance.
The alliance of France's Renault and Japan's Nissan Motor and Mitsubishi Motors announced Tuesday a venture fund to invest in such growth fields as autonomous driving and artificial intelligence, aiming to dole out up to $1 billion over five years. Toyota established Toyota AI Ventures in the U.S. tech haven of Silicon Valley last July.
Panasonic set up its California-based Panasonic Ventures that April. Starting out with roughly $100 million, the fund took on investment-savvy veterans of companies including American microprocessor maker Intel.
The Panasonic arm has invested in four companies, including a U.S. venture for 3-D printing of metal components. The goal is to "capture the growth power of startups to give birth to new businesses," said the fund's president, Masahiro Kinoshita.
Real estate company Mitsui Fudosan has jointly managed a 5 billion yen fund with Tokyo venture capital firm Global Brain since 2016. Their investment targets have included an Israeli company working on AI-based methods for server maintenance and cyberdefense.